3PL companies and third party logistics providers offer logistics and supply chain management services to businesses that need additional resources to manage their logistics operations. They provide services, such as warehousing, transportation, inventory management, etc.
However, things are not running smoothly for 3PL logistics providers. They face many challenges in the industry. In this blog we will discuss these 3PL challenges and how to overcome them.
What are the 5 Common Challenges 3PL Companies Face & How to Overcome Them?
3PL companies play the role of an intermediary in the supply chain between shippers and transporters. However, with increasing demand for faster and more flexible supply chains, 3PLs companies struggle to secure sufficient transportation and warehouse space and face other 3PL challenges. Let us now go through them briefly and see how a 3PL can help overcome logistics challenges.
- Problems with Transportation Management: Managing on-time pickup and delivery of customer shipments across a multi-carrier trucking network is a major challenge for third-party logistics providers (3PLs). With the truck driver shortage reaching critical levels, 3PLs companies face difficulties finding experienced drivers to cover loads, leading to service delays.
To overcome this, 3PLs should focus efforts on both retention and acquisition. Offering competitive compensation, better routes and schedule predictability can reduce driver attrition. As a 3PL company, this will allow you to retain your drivers and avoid delays in shipment delivery.
- Shortage of Warehouse Capacity: Third-party logistics companies heavily rely on extensive warehouse networks to store and manage customer inventories before last-mile delivery. However, with the rapid growth in ecommerce, finding additional storage facilities and staff in key areas is increasingly difficult and challenging. Additionally, these capacity and workforce skill mismatches across warehouses greatly hamper the flexibility 3PLs require.
To tackle limited warehouse capacity, 3PLs can lease decentralized multi-site warehouses positioning inventory closer to end-customers, rather than centralizing stock. To optimize fulfillment operations, they can develop a robust warehouse management system (WMS) with real-time visibility. This will help 3PLs coordinate activities from receiving to shipping.
- Not Adapting New Technologies and Security Measures: Adapting technology is one of the biggest challenges companies face, mainly because technology is costly and hard to implement correctly. Any technical breakdown in warehousing, transportation, or delivery systems can severely impact services and disrupt customer supply chains.
Adapting new technologies can be hard and time consuming, but once you have integrated them into your business model, it can reduce your reliance on manual operations and save you time and money down the line. You can automate employee onboarding processes, shipment tracking and use software tools to manage your shipments.
It is also important to secure your customer’s data and maintain their privacy. That’s why you must invest in robust cybersecurity measures and data encryption to ensure systems are secure against potential attacks or data breaches.
- Communication Breakdown: Effective and transparent communication is imperative for 3PL companies across all operations, but breakdowns can easily occur. Without clear and consistent communication between 3PL management, warehousing staff and truckers’ misunderstandings can happen leading to shipping errors.
To prevent communication breakdown, third party logistics company can use emails to communicate with managers, warehouse workers, and drivers. This will help them maintain regular and consistent communication and any avoid any confusion between the customer and the provider.
- Unable to Comply with Government Regulations: As a 3PLs you must adhere to various local, federal and international regulations covering areas from safety to paperwork. However, staying up-to-date and compliant with frequently updated laws across multiple jurisdictions is a time-consuming challenge.
Addressing compliance and planning challenges for 3PLs involves creating streamlined processes to ensure adherence to diverse regulations. For example, if you are transporting chemicals and oil related products you must make sure to register with the federal material safety program. Ensure all your drivers are licensed, you have proper insurance, and you have the necessary documents to transport materials safely.
Conclusion
To be a successful third party logistics provider, make sure you address common 3PL challenges like communication breakdown, failure to adhere to federal and state laws or not being able to integrate technology. These challenges, when resolved, can increase your chances of becoming a successful 3PL provider.